Global Crisis Debate

Has austerity gone too far?

Moderator: Giancarlo Corsetti (University of Cambridge and CEPR)

Europe has embraced austerity but financial markets still worry about debt sustainability - at least in part due to slow growth that has been associated with fiscal belt-tightening. Is austerity self-defeating? Is it keeping Europeans underemployed for years and thus destroying the medium-run growth needed to pay off the debt? Or are the belt-tighteners wisely steering their nations clear of Greek-like tragedies?

The questions for debate are simple:

  • Should governments let up on austerity now that the global economy is weak but credibility on fiscal sustainability is far from granted?
  • And under what circumstances would be wise to do so?

 

Why do we need a financial sector?

Moderator: Wouter DenHaan (London School of Economics)

This VoxEU debate poses the questions why we need a financial sector and how much should we reasonably pay for it? Whilst some activities in the financial sector are obviously beneficial and should be maintained, others are less clearly so in today's climate. Various proposed regulatory changes will make it more costly and difficult for the financial sector to perform some activities - but is that necessarily a bad thing? If appropriate regulation could serve to curb excesses whilst not affecting the benefits and value added of the sector as a whole then, potentially, resources could be freed up for other more socially useful activities.

The future of EU trade policy

The European Commission has just launched a public consultation on the future direction of EU trade policy. This VoxEU debate, moderated by Richard Baldwin, launches an online discussion of the Commission's proposals.

The first column, by DG Trade's Chief Economist, presents the key elements of the new policy.

 

The Global Crisis

VoxEU.org partnered with the UK government to collect the views of economists from around the world on what should be done to fix the global economy. The analysis and proposals that appeared in the "Global Crisis Debate" fed directly into the UK's preparation for the London summit of world leaders in April 2010. This debate was featured on the UK government's own web site. The debate has six themes:

Macroeconomics, moderated by Philip Lane and featuring lead commentaries that include:
Financial rescue and regulation, moderated by Luigi Zingales and featuring lead commentaries that include:
Open markets, moderated by Richard Baldwin and featuring lead commentaries that include:

 

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Latest Debate Commentaries

  • Reduce friction or it might break: Lessons for euro members from Latvia's exchange rate and fiscal policies (Has austerity gone too far?)

    Thomas Grennes Department of Economics, North Carolina State University, USA, 29 June 2012

    By Thomas Grennes, North Carolina State University, and Andris Strazds, Nordea Bank Relevance of Latvia's experience to other countries The Latvian government responded to a severe economic shock in 2008 and 2009 by implementing a fiscal austerity program that has received praise from some outside observers and criticism from others. Olivier Blanchard expressed mild approval, but he expressed...

  • Latvia: Going beyond the fiscal austerity debate (Has austerity gone too far?)

    Anis Chowdhury The University of Western Sydney, Australia, 27 June 2012

    Latvia: Going beyond the fiscal austerity debate Iyanatul Islam and Anis Chowdhury[1] ‘What is it about Latvia’, laments Simon Wren-Lewis, that leads commentators to suspend their ‘critical faculties’ when discussing the current economic circumstances of this Baltic state?[2] Latvia is at the epicentre of the debate on ‘expansionary’ fiscal austerity. Can one...

  • Development and the Crisis: The Reasoning for Humanitarian Diplomacy and International Humanitarian Interventions in Regions of Conflict, for Group 20 Meeting Mexico, June 2012, by Dr Mark Fernando (Development and the crisis)

    Dr Mark Fernando Humanitarian Healthcare, 18 June 2012

      Development and the Crisis:  The Reasoning for Humanitarian Diplomacy and International Humanitarian Interventions in Regions of Conflict,  for Group 20 Meeting Mexico, June 2012.   To be sure,  it is in the wider macroeconomic interests of all nation states to enable there to be humanitarian diplomacy, humanitarian healthcare initiatives and international...

  • Effective fiscal instruments for the European Commission (Has austerity gone too far?)

    Beatriz de Blas Universidad Autonoma de Madrid, 7 June 2012

    Fines and other sanctions are an indirect and counterproductive way of eliminating deficit bias. A more direct and credible way to solve the moral hazard problems in Eurozone fiscal policy would be for each member state to delegate executive power over an effective fiscal instrument to a European budgetary authority.   European debt levels now hovering around 100% of GDP represent a painful...

  • Fiscal austerity and the youth employment crisis (Development and the crisis)

    Anis Chowdhury The University of Western Sydney, Australia, 1 June 2012

    Fiscal austerity and the youth employment crisis   Iyanatul Islam and Anis Chowdhury[1]   Lack of job opportunities for young people has become painfully evident in the advanced economies, and most notably in the Euro zone and the UK. This has emerged against the grim background of a lingering recession. Growth in the Euro zone has been virtually zero in the most recent quarter while...

  • Indian Rupee in Crisis (Countries in crisis)

    Abhishek Kumar University of Delhi, 22 May 2012

      Recent fall in Rupee Vs Dollar exchange rate is quite problematic for India Rupee and I myself found it very disturbing for Indian Economy. The first image shows the recent Rupee Vs Dollar Exchange rate and one can easily see that Rupee has depreciated a lot. Surprised by the above finding I tried to dig it further. I took US and Indian CPI monthly data and tried to get some insight...

  • Greece: an entirely political crisis (Development and the crisis, Has austerity gone too far?)

    18 May 2012

    Now that the latest attempt at forming a national government has failed, the Greeks will be voting again on 17 June. If surveys of voting intentions are anything to go by, the crisis is only just beginning to get really nasty.  The example of Greece is evidence of the need for reforms to be consolidated and socially fair, since – not least in order to secure greater popular support...

  • Greece: an entirely political crisis (Development and the crisis, Has austerity gone too far?)

    18 May 2012

    Now that the latest attempt at forming a national government has failed, the Greeks will be voting again on 17 June. If surveys of voting intentions are anything to go by, the crisis is only just beginning to get really nasty.  The example of Greece is evidence of the need for reforms to be consolidated and socially fair, since – not least in order to secure greater popular support...

  • Time to reform institutions (Has austerity gone too far?)

    Vuk Vukovic Adam Smith Institute; LSE, 9 May 2012

    Europe needs to move on beyond austerity and stimulus, and focus on reforming its institutional system that will address the misplaced incentives and the dependency mentality, and restore proper market signalization that will enable new patterns of specialization and increase productivity.  There has been too much backlash between proponents of austerity and proponents of a fiscal stimulus....

  • Too-Small-To-Survive: The need for further economic integration (Countries in crisis)

    Georg Erber DIW Berlin, 20 April 2012

    There has been much talk about the Too-big-to-fail issue of commercial banks after the global financial and economic crisis. Systemic relevant banks could not go bankrupt because of the severe systemic consequences for the whole global economy. The default of Lehmann Brothers has become the example why large banks need a guarantee that they would be saved in case of a major financial market...